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Bohai Steel in China is at Stake

Bohai Steel is one of the biggest steel factories in Tianjin, China. It has produced 22 million tons of steel every year, including bars and plates. This capacity let the deficit amount of the steel of the nationwide be reduced. The matter of fact, this factory was backed up by the government of Tianjin. BHS is a state-owned business group combined by four state-owned steel manufacturers. The four manufacturers are Tianjin Pipe Group corporation, Tianjin Iron & Steel Group Co., Ltd., Tianjin Tiantie Metallurgy Group Co., Ltd. And Tianjin Metallurgy Group Co., Ltd. The group is a massive production business group which specialized in sintering, iron making, steelmaking, continuous casting, steel rolling and metal productions.

Unfortunately, this factory is rumored to have serious debt problems with hundreds, and even more, of creditors, which cost as much as 192 billion yuan (equals to $28.8 billion US Dollars). The steel executives, the government, the bankers, and others related to the existence of Bohai Steel has been argued about its future. The committee has been formed by the Tianjin government to restructure Bohai Steel, but the bankers seem to have a disagreement with the plan. The bankers become very careful with the committee proposal to extend Bohai Steel loans and cut their debt interest for about 10%. Some of them are claiming to get Bohai Steel's land to be sold due to pay its debts.

The argue keep overwhelmed between the instruments. The government has been persistent to give Bohai Steel an extra chance to get up from its bankruptcy process, which make the governments considering two things; The government asks the bankers to continue to lend their money to Bohai Steel, but the interest is being paid by the government. Or, a debt for equity swap program. This last consideration is given due to the assets of Bohai Steel Factory, which has reached fabulous number (290 billion yuan, which equal to $43.5 billion US Dollar). When a global financial crisis occurred on 2008, Bohai Steel expanding their assets, following government program. The results are, this company has grown this big nowadays.

In the past years, the bankers willing to lend the money to Bohai Steel due to its wealth, rich company. They said that they thought it's going to be safe to lend them some several billion yuan. This conclusion doesn't make the creditor feel safe at all. They thought skeptically that it would be useless to restructure Bohai Steel if the government didn't make a very good management on the overall process and eliciting the transparency of the company. Bohai Steel will be ended like it was, buried in debt, said one of the executives. It has to be effective, otherwise, it's will have a problem with the implementation, said another executive. The government had this almost bankrupt Bohai Steel to cut their production by two third or, equal to 15 million tons in 2016. There is no new group news on Bohai Steel website since 2016.

A hundred bankers or the creditors included Bank of Tianjin, Bank of Beijing, Tianjin Binhai Rural Commercial Bank (Each of them has lent about 10 billion yuan to Bohai Steel), China Construction Bank, Bank of China, and Industrial Bank.

Bohai Steel isn't alone to face their debt. The several other steel company has faced the same problem, and also the coal company. The government has determined their policy for this almost collapsed company, which is to cut their employee and production until below of the market demand. They also ask the financial institution to support these local steel companies.

Bohai Steel not just buried itself in debt, but also the subsidiary company of it. One of the worst is Tianjin Iron and Steel Group Co. At first, Bohai Steel has promised 9 percent yields to their affiliates, which cost 350 million yuan, but then disappointing them and missed the payment. This investment released by Tianjin Iron and Steel. Later known that Tianjin Iron and Steel also cannot repay their debt to the bank since 2011. Tianjin Iron and Steel also operate several companies like Tianjin Tiantie Metallurgy Group Co., Tianjin Pipe Corp., and Tianjin Metallurgy Group Co. Tianjin Iron and Steel has risen its debt from 32,8 billion yuan to 60 billion yuan. They raised 3-billion-yuan loan after sold their high yielding trust to their employee, but also cannot repay them. This makes the corporation in need of help from the bankers.

Tianjin Pipe Corp., a subsidiary of Bohai Steel, which is the only one who didn't cut their production, also in a big debt problem it reached 46 billion yuan. Bohai Steel also has a loan to its trading partners, Tewoo Group. It seems not just like the steel company problem like everybody see from the outside, but also the system problem inside the corporation and their subsidiary which make it decay.